Mortgage Glossary

A - D, E - H,  I - L, M - P, Q - T, U - X

Acceptance Fee

The fee charged by some mortgage lenders to process a mortgage.

Advance

Amount of the mortgage loan to be issued by the lender.

Annual Percentage Rate (APR)

The total cost of a credit facility, expressed as an annual percentage of the amount of credit granted. It takes into account the interest rate charged and any other fees.

Annuity (or Repayment) Mortgage

Also referred to as a capital and interest mortgage (the most common type of mortgage), where the monthly repayment consists of an amount to repay the capital (original loan amount) plus an amount towards the interest that is charged to the mortgage account. 

Appreciation

The amount a property has increased in value.

Arrears

Arrears occur where you fall behind with regular payments (for example, monthly mortgage or loan payments), or do not pay the correct amount required.. In certain cases, surcharge interest may apply to the amount of arrears. (refer to Surcharge Interest)

Breakage Costs

If you break the terms of a fixed interest rate loan agreement, this may incur a cost to the Bank which you may have to pay.

Broker

A mortgage advisor offering advice on the range of mortgage deals available from various lenders.

Buy-to-Let / Investment Mortgage

A mortgage loan for a property that will be let by the borrower to tenants as a source of income and investment - the buyer will not live in the actual property. This mortgage loan may have different conditions than those applicable to owner occupier loans.

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Collateral

The security for a loan is sometimes described as collateral. In the case of a mortgage loan, the property being purchased is considered the collateral for the loan.

Cost of Credit

Cost of Credit is the difference between the amount you borrow and the total you will repay including the interest by the end of the loan period.

Credit Rating

The rating that lenders put on borrowers based on their credit worthiness - usually based on the borrower’s credit history.

Credit Search

This is where the Bank obtains credit references from a credit reference agency or agencies to enquire on your credit history.  This may influence your ability to obtain credit.

Default

Where a borrower misses one or more repayments on a loan on the due date(s) or otherwise breaks the terms and conditions of the agreement, they are in default.

Deposit

A sum of money paid to the seller on exchange of the contract for the purchase of property. This is subject to forfeit if the purchaser does not complete the transaction.

Depreciation

Any decrease in the value of a property.

Discounted Rate

An initial discount off the original interest rate, typically for a period of one or two years.

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Endowment Mortgage

A mortgage loan advanced by the lender which is intended to be repaid principally by means of a life endowment insurance policy taken out by the borrower and assigned to the lender.

Equity

The difference between what a home is valued at and the outstanding mortgage debt.

European Central Bank (ECB)

The European Central Bank is the central bank for Europe's single currency, the euro.

First Legal Charge

A mortgage lender takes a First Legal Charge on the property being purchased which means that if a borrower defaults on mortgage repayments and the property is sold to repay debts etc., the mortgage lender will be the first party to receive any proceeds of the sale.

Fixed Interest Rate

The rate payable on a mortgage loan which does not change for a specified period, regardless of changes to the lender's variable rates. The specified period is known as the fixed period.

Guarantor

A guarantor is a person other than the borrower who guarantees mortgage loan repayments.

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Letter of Loan Offer

Once a mortgage application is approved, a formal Letter of Loan Offer is sent to the borrower setting out the conditions of the loan. The borrower’s solicitor will also receive a copy with a request to proceed with the legal formalities.

Loan to Value (LTV)

Loan to value’s are shown as percentages and represent the relationship between the size of the mortgage loan and the value of the property. For example a mortgage of EUR90,000 on a property valued at EUR100,000 would be shown as 90% Loan to value.

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Mortgage Life Assurance

A life assurance policy put in place to cover the principal amount of the mortgage loan outstanding in the event of the death of a borrower. Lenders require confirmation that the life assurance policy is in place before drawdown of the mortgage loan.

Mortgage Loan

A long-term loan, usually 20 to 35 years, secured by a mortgage against the borrower’s property (refer to First Legal Charge).

Mortgage Term

The agreed length of time taken to make the full repayment of the mortgage loan.

Mortgagee

The lender providing the mortgage loan.

Mortgagor

The person who takes out the mortgage loan i.e. the borrower.

Negative Equity

When the value of the property has fallen below the outstanding mortgage debt.

Payment Protection Insurance

If you chose to purchase Payment Protection insurance, this covers your repayments on a loan / mortgage / credit card if you suffer from an accident, illness, death (excluding mortgages) or redundancy.

Principal

The sum of money borrowed from the lender - generally what is owed, not including the interest. This is also known as capital.

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Redemption

When a mortgage loan is paid in full - including interest to date and all charges. This usually occurs when moving to another property or when the end of the mortgage term is reached.  For example, if the mortgage is at a fixed interest rate, and is paid off in total before the end of the mortgage term. (refer to Breakage Costs)

Remortgage

A process whereby the mortgage loan due to one mortgage lender is repaid by a new mortgage loan issued by a new mortgage lender, usually also requiring a new mortgage over the property.

Repayment Break

Repayment Breaks allow the borrower to spread monthly repayments over a shorter number of months, for example, 10 months instead of 12, or postpone repayments for a time, for example 3 months.

Split Rate Mortgage

A proportion of the mortgage loan is set at a fixed interest rate, and the remainder at a variable interest rate. In the event of an interest rate change, only repayments on the variable portion of the mortgage loan will be affected.

Standard Variable Rate

A standard variable rate is a variable rate set by the lender and may change at any time at the lenders discretion.

Surcharge Interest

This is additional interest that may be charged on the amount unpaid on any repayments due on a loan.

Tax Relief at Source (TRS)

Tax relief for home mortgage interest is provided by the lender. The lender either reduces the mortgage repayment by the amount of the tax relief, or a credit is lodged into the account from which the repayments are made. This applies in respect of a main residence only.

Title Deeds

Legal documents that provide evidence of a person’s ownership of a property.

Top up Mortgage Loan

An additional mortgage loan given by the lender to an existing borrower on the same mortgage security. The mortgage loan ‘tops up’ an existing mortgage to a higher level.

Tracker Rate Mortgage

A Tracker Rate is an interest rate usually at a set percentage (margin) above the European Central Bank rate which 'tracks' changes in the European Central Bank rate. This margin is guaranteed for the full term of the loan unless there is a material change in the terms of the loan.

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Valuation Survey

A survey that can be requested by lenders so as to provide an independent professional valuation of the property.

 

Legal Notice

The information provided in this guide does not constitute tax, legal, investment or any other advice.

 

 

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